Real estate transactions in Japan by institutional funds in the second half of 2018 reached 1.729 trillion Yen (approx.15.8 billion USD), down 34% from the second half of 2017 and the lowest level seen in six years.
Acquisitions by foreign funds accounted for as much as 30% of transactions in Japan in 2017. By the second half of 2018, however, acquisitions dropped to 91.9 billion Yen (approx. 840 million USD), a 90% drop from 2017 and a 5% share of the total for the period.
There are two main causes for the drop in transaction volume:
- A noticeable drop in the supply of properties available for purchase
- The properties that are circulating on the market are priced above investors’ criteria
Notable transactions have also decreased in number. The biggest sale in 2018 was the Shiba Park Building in Minato, Tokyo, which sold to a group of seven corporate buyers for approximately 150 billion Yen (approx. 1.4 billion USD at the time). The previous owner had paid 120 billion Yen for the property in 2013. The largest transaction in 2017 was Anbang Insurance Group’s purchase of 260 billion Yen (approx. 2.3 billion USD at the time) in residential assets from Blackstone Group. In late 2018 the now government-owned insurer was reportedly looking to dispose of approximately 200 million USD worth of the assets in an effort to fix its balance sheets.
Some insiders are suggesting that real estate prices may be showing signs of reaching their peak. With investment yields in the 3% range, CBRE suggests that there are fewer investors who would consider yields below this level.
The transaction volume data was compiled by the Urban Research Institute Corporation.
Source: The Nikkei Shimbun, January 27, 2019.